Oil tops $100 mark amid fears that Egypt crisis will lead to the closure of the Suez Canal

Motorists face paying even more to fill up their cars after the price of oil hit the symbolic $100-a-barrel mark yesterday.

Amid fears that the crisis in Egypt could lead to the closure of the Suez Canal, Brent crude prices rose sharply in London to $101.08.

Although the canal is currently operating normally, traders are fearful that supplies of key commodities could be disrupted.

It is the first time prices have risen above $100 since October 2008 and came as David Cameron effectively committed the Government to introducing a ‘fair fuel stabiliser’ to help cash-strapped motorists.

Oil has climbed steadily from $70 a barrel last autumn, but the price is still a far cry from the record of more than $147 seen in July 2008.

To fill up a 55-litre car currently costs more than £75 and the prospect of another price rise will worry ministers who are acutely aware of the squeeze on family budgets.

Yesterday the Prime Minister went far further than he had previously by insisting that the Treasury must find a way to reform the tax system so that fuel duty goes down when oil prices go up and vice versa.

He said he wanted a system where ‘we share the difficulty of that with the motorist’. ‘I think that’s fair,’ he added. ‘That’s what we are going to try to do.’

Mr Cameron’s comments are the strongest signal yet that a fuel stabiliser will be unveiled in the Budget, due in March.

The Prime Minister has now voiced support for it on so many occasions that it will be a major embarrassment if Chancellor George Osborne fails to produce one.

Although the Suez Canal is currently operating normally, traders are fearful that supplies of key commodities could be disrupted (A tanker passes through the Canal in Ismailia, Egypt)

Last month Robert Chote, head of the office of Budget Responsibility, described the system as unworkable.

However, ministers recognise that they must respond to public disquiet about soaring petrol prices and head off threatened fuel protests by hauliers.

Currently, fuel duty is planned to rise every year by at least the rate of inflation, regardless of what happens to the price of oil.

The result is a row every year as the Chancellor faces pressure to postpone or cancel the increases in fuel duty proposed in each Budget.

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Economist Andrew Lilico, who first proposed a fair fuel stabiliser in 2000, said: ‘Instead of fuel duty rising every year, the level should vary as oil prices varied, for example, being cut if oil prices rose very high and raised if oil prices fell very low.’

He added: The Government takes such a high proportion of the price of petrol as tax – about two thirds – that it all but sets the price.

‘Since it virtually sets the price, the Government might as well do so competently. It makes little sense if its chosen price is deviated from significantly because, say, oil prices fall or rise.’